RedPeak Properties confirmed today it no longer plans to develop luxury apartments in the heart of West Highland.

“This is not a win for the neighborhood,” said Mike Zoellner, president of Denver-based RedPeak.

He pulled the plug on the proposed development because it no longer pencilled out because of rising costs and more competition from other new apartment developments in the area.

“This was a very difficult decision to make,” Zoellner said. “It has been three years and a significant amount of money and resources.”

The three sites north of West 32nd Avenue and Lowell Boulevard had been the subject of a high-profile zoning trial, in which 10 neighbors initially sued RedPeak, landowner Tom Wootten and the Denver City Council. The neighbors lost that legal battle and recently negotiated a settlement with Wootten. RedPeak, which hasn’t had the properties under contract for more than a year, was dropped from the lawsuit.

Prior to the lawsuit, RedPeak met with neighbors, retailers along West 32nd and Councilwoman Susan Shepherd to reach an agreement.

“Much time has passed, and circumstances have changed on the business and economic landscape,” RedPeak said in a statement released this morning.

“As a result of increasing development costs and the additional construction of new apartment communities in Central Denver, RedPeak has decided to focus on other investment opportunities in the Denver area, and no longer pursue development at 32nd Avenue and Lowell Boulevard.”

The company, which prides itself on developing luxury and energy-efficient buildings, said since work began on the proposed development, it has “always had the vision of bringing a superior residential and retail development to the neighborhood. rom the beginning, our entire organization has worked diligently to constructively engage with the neighborhood, surrounding retail businesses, the City of Denver and Historic Denver to design a high quality, mixed-use community that would enhance the vibrant and welcoming lifestyle that has always made West Highland such an appealing place to live.”

RedPeak had planned about 150 rental units and 10,000 square feet of retail on the ground floor in the project.

Roots run deep

Zoellner said because his family and his wife’s family had deep roots in the area, it was especially painful to walk away.

Also, the late Evan Lichtenfels, who unexpectedly died last year at the age of 35, had devoted a lot of his time on the development, making the decision even more difficult.

“In the end, it was a business decision,” Zoellner said.

Councilwoman Shepherd learned of RedPeak’s decision on Monday, after meeting with Zoellner for more than 30 minutes.

“I am so disappointed,” Shepherd said.

“Honestly, I think they are a professional, Denver-based firm with tremendous integrity and roots in Northwest Denver. They build a great product,” Shepherd said.

“I thought they would have been a good fit for the neighborhood. I am sorry we are losing them,” Shepherd continued.

She also is concerned about the developer that might replace RedPeak.

“It make me nervous,” Shepherd said. “We don’t know who will replace them. I am very worried it might be sold to an out-of-state developer with no sense of neighborhood or cultural sensitivity.”

Another concern is that Wootten may leave the property vacant until the next real estate cycle. One nearby merchant already has conveyed his concerns to Shepherd that the site on Lowell, which includes the boarded up former Beth Eden Baptist Church building, could remain vacant for years.

While the U-MS-5 zoning allows five-story buildings along Lowell Boulevard, Meade Street and West Moncrieff Place, RedPeak had voluntarily agreed to a four-story building on Moncrieff before the lawsuit was filed.

In 2012, Lichtenfels told InsideRealEstateNews.com a fifth floor on Moncrieff probably would only have seven to nine units, because of step-back and set-back requirements.

A group of 10 neighbors filed a lawsuit seeking to send the U-MS-5 zoning back to City Council, but it lost the court battle.

It recently reached a settlement with Wootten. In exchange for not having to pay about $40,000 in court fees, the neighbors, who were members of a group called No High Rises in West Highland, dropped an appeal.

“Everyone has to do what they need to do,” Shepherd said. “Well, they took a big roll of the dice.”

WHNA weighs in

Kevin Neimond, president of the West Highland Neighborhood Association, said he was surprised, but not shocked, that RedPeak was out.

“Denver is booming with new apartment construction and I’m sure it causes all developers to question whether the the products that they supply at certain price points will be met with a demand,” Neimond said. “Additionally, we are all very familiar with the rising costs of goods, so I’m sure that had to factor into Mr. Zoellner’s decision, too. The economy is certainly improving, but that doesn’t mean all development opportunities are slam dunks financially, as this shows.”

While some residents pilloried Zoellner when they learned of his plans, Neimond did not share that view.

“From the first time that Mr. Zoellner approached WHNA, I found him to be a sincere man with an appreciation for the community that (Northwest) Denver residents and merchants have built,” he said. “It had always been my hope that the community would be able to find more common ground with RedPeak. Unfortunately, the desires of the neighbors did not align with the business decisions that made the most sense for RedPeak.”

Neimond said he doesn’t know what the future holds for the three parcels.

“I’m sure Mr. Wootten has some ideas for his land, and I know the community would welcome any opportunity to talk with him to hear those ideas,” Neimond said. “I know some folks might saying I’m dreaming, but, even after all that has occurred, I still have a positive outlook and believe that development can occur on these properties that will satisfy the needs of Mr. Wootten and incorporate the desires of the neighbors. We may even be in a better position than before to find the sweet spot, as the last few years have fleshed out the facts and allowed everyone to see this thing from every angle.”

Laurie J. Rust, one of the pro bono attorneys for the neighbors in the lawsuit, said she is hopeful that Wootten can come up another buyer that would be good for him and the neighborhood.

“We respect that Mr. Wootten is a businessman and that his groups invested in the land to make money,” Rust said. “He testified that he cares deeply about the neighborhood. We all have that in common. He also testified that he had rejected a few previous offers because the proposed plans were either inappropriate or because he anticipated resistance from the neighborhood. I think those statements demonstrate that he is reasonable and is willing to work to find a mutually agreeable solution. While the neighborhood opposed three tall apartment buildings, there is a wide range of development that would be welcomed.”

Rust also said the Shepherd should play a role in bringing another developer to the table.

“We are hopeful that Councilwoman Shepherd will use her influence and connections to help identify and attract projects that are consistent with the desires of those who live in West Highland,” Rust said. ” There is a tremendous opportunity to develop the parcels in a way that benefits everyone involved. “

As part of the settlement, Wootten is seeking a non-historic designation for the former church building. If it received non-historic status, a covenant will be put in place limiting the height of future buildings on Meade and Moncrieff to four stories each.

If the church is designated as a historic structure, five story buildings would be allowed on those sites. The building has never received historic status in the past, although the city has said it is “possible” it might qualify.

The nonprofit Historic Denver has joined with a handful of neighbors that are seeking historic status for the building.

If the Denver Community Planning and Development department decides it is a historic building, it would still need approval by City Council.

Rolling the dice

Shepherd said she needs to hear both sides before she makes a decision on how she would vote.

“If the church is declared historic and they go back to five stories on all three parcels, it would seem that the neighbors took a very big roll of the dice,” and would have had a better result if they had continued to negotiate with RedPeak, she said.

“We had already achieved some very good results through the design advisory committee process,” Shepherd said. “If the building is declared historic, it negates all of that.”

She also said it is “confusing” that support for historic status for the church has surfaced in recent weeks.

“Through the whole process, which most go back two or three years now, the neighbors were pursuing issues of height, mass and density and you did not hear anything, or very few comments, about people worried about the church,” Shepherd said.

“It surprised me that out of the blue, this momentum to push through a historic designation has become an issue,” she said.

“I definitely understand why people want to save it,” Shepherd said. “It is an attractive building and I understand they want to keep it as part of the fabric of the neighborhood. If the church is declared historic, all three properties could go up to five stories. I hope people understand the repercussions.”

Zoellner said the potential for historic status played no role in his decision not to move forward.

“We were always planning to save the church and incorporate it into our development,” Zoellner said. “We were not going to landmark the church, but we were going to renovate and repurpose the church.”

He said they never got the point to consider razing the church building.

At this point in the real estate and economic cycle, it doesn’t matter, he said.

“Prices have gone up 20 percent to 25 percent since we first started,” Zoellner said.

“It is really the escalation of costs and the increase in new supply that is going to influence rental rates that drove our decision.”

Even in the best of times, it was a challenging deal because it was three separate parcels that could not be served by one, central parking structure and power supply, he said.

He said RedPeak spent “significant” money on the design, permits, soil tests and other costs.

Lawsuit delayed opening

If not for the lawsuit, Zoellner said the three buildings would have been completed by now. He noted RedPeak’s One City Block project in Uptown was “running side by side” with the West Highland project and One City Block recently opened and is already 50 percent leased.

Although RedPeak made the decision last week to not move forward on the West Highland deal, he said in the back of his mind he had doubts for a very long time.

“We knew we were going to have to cut the quality of the units and buildings to get the yields we needed,” Zoellner said. “When we started to think about cutting quality to chase yields, we thought: “This is not us. This is not how we do business.”

Frivolous lawsuit?

He said he wished it had turned out differently.

“My big regret is that we could not have put all of that money that we would have saved if not for the delays cause by that frivolous lawsuit into the buildings,” Zoellner said. “To be clear, again, the neighborhood did not win here. This is a lost opportunity for the neighborhood and it is a lost opportunity for us.”

Rust has another perspective on the lawsuit.

“I understand Mr. Zoellner’s disappointment, but disagree with his assessment of the lawsuit as “frivolous.” There is a big difference between not winning and frivolous,” Rust said. “From a legal standpoint, the court denied Mr. Wooten’s motion for judgment on the pleadings, his motion for determination of matter of law, and his motion for directed verdict (argued after plaintiffs rested their case at trial). At every stage, the court allowed the case to proceed, even if it ultimately decided against us. From a practical standpoint, the lawsuit served an important function. It allowed neighbors to voice their dissatisfaction with the process and to send the message that they would hold decision makers to account.’

Zoellner indicated the lawsuit may have backfired.

“You know, when we started this process you could build three, five-story buildings. Today, you can build three, five-story buildings. It is still great real estate and my guess is that the properties will be sold and someone will build three, five-story buildings at some point in the future,” if the church is granted historic status.

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John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.

I find it very disconcerting, the way Susan Shepherd is dissing her constituents in her dialogue in this article in a sort of “I told you so” tone. It’s been clear all along that Ms. Shepherd is in favor of mass development in the Highlands, regardless of her repeated defenses that declare she is working for her community and her constituents.

In the very beginning of this whole movement, neighbors were very vocal and trying to save the church and looked to get landmark or historic status, and I believe it was denied, or we were told it would take too long, so I’d be interested in why historic status would be granted now. Probably so they can build 5 stories instead of 4 if the church is not granted historic status.

It’s funny to me how the likes of Bill Menezes, Kevin Neimond and Laurie Rust are quoted as saying (B.M. in the DBJ) how confident they are that a new, better plan will be presented. When that doesn’t happen, maybe they’ll figure out that by their needless overreaction, they did indeed “cut off the nose to spite the face”, and acted out of pique, opposed to the sensible and visionary future of their neighborhood. Can you say “hello stucco!”?

It is sad to see RedPeak leave but it is also an artifact of the development process in Denver. I was every interested in see what was proposed for the site but from the start it was difficult to see any possible design ideas/presentations to the redevelopment. So while not opposed to the redevelopment i was concerned about the look and feel as pertains to the nature and aesthetic of the development. Note, i actually believe infill and density are important in making an Urban area more viable. But once after much questioning was i able to see some design ideas, it was obvious it was more “me too” development. There was no innovative design compatible with the existing architecture in the area. There was not attempt to integrate the wonderful nature of the existing buildings or their layout/facades into a more sympathetic whole with the existing structures.

Perchance if folks had more opportunity to work with the idea of development there might have been a more harmonic convergence.

What is so sad is the state of architectural design in single family, multifamily and apartments in NW Denver. It is all so they do that so we’ll do that. There is a real heard mentality right now and it is very sad to see flowing through the rebuilding community. There are some wonderfully creative folks in this community which if our council member and development community would better include in the process could alleviate much of the animus in the re-development now taking place.

Will, I love your music – acting not so much. Do we litigate “me too development?” Do we block all projects that lack “harmonic convergence?” Now you’ll have plenty of time to contemplate the possible “innovative design” of a dirt lot for a few years.

No we do not litigate but wrt to the what was proposed it was a poor design. Basically imho it did not contribute to the look and feel of the zone. The issue of density did not bother me at all, in fact it is appropriate for that area. That what urban zones are and why they are lively. For some (many?) folks it comes down to wanting the liveliness that density brings but not the congestion. Not my issue. Mine has to do with quality design work of which the original proposal was not.

Just so folks realize there is huge difference between this project and St Anthonys. The community, city, etc did come together in ” harmony” with the task force plan. The problem is EFG has told the entire Sloans Lake neighbors to F off..ignoring the plan and the city going along with EFGs …general Devlp plan. Project 12-20 stories on 17th. UNWILLING TO PUSH THEM BACK OR CENTER THEM ON THE SITE. You dont engage the public tp design a plan, adopt it into the current zoning code and toss it …well into the lake.

There is also a huge difference between opposing a proposed development project that is in your neighborhood and opposing a project that is not in your neighborhood. Despite the proximity to Sloans Lake, the St Anthony’s development is within the West Colfax neighborhood (where the majority support it) and not within the Sloan’s Lake neighborhood, where it would more than likely have very little impact. Plus, the proposals that have come out so far are well within the current zoning, if not underutilizing their potential, as is the case with the Colfax proposal. Fears of a massive increase in traffic through the Sloan’s Lake neighborhood are not supported by the facts of the present or future situation at St Anthony’s.

I think the NIMBY’s responsible are swelling with pride. I live here and know a lot of them. They consider this a win. Even their platitudes following Red Peak’s exit are disingenuous. I only hope that they are held financially accountable someday for their anti-any-development stand. I think the owner should blacktop these lots and charge for parking (extra for the plaintiffs), and turn the church into rentable storage units or Section 8 housing. Better yet, build 5 story ’70’s style architecture like the 13 story abortion at the south end of the Highland Square. I strongly recommend the new developer to ignore the neighborhood group. They certainly don’t represent me and never have. Zoellner did the right thing by saying good riddance. I give Susan Sheppard a lot of credit for at least a balanced approach. The guy who thinks she is dissing her constituents seems to not realize at least half of them are on the opposite side of this issue from her! Enjoy the blight – No Highrises group. Do us a favor – move to Highlands Ranch!

Once again,the idea that all development is good, is te wrong way to proceed. There are development that contribute to an area and developments that seek to rely on the neighborhood. Therein my concern about RedPeak. While i support redevelopment of the site, what was ultimately shown and proposed for the area, was extractive, opportunistic development. It was more of the same that is happening all over the area, nothing new, nothing outstanding. Not clear to me that lots of real thinking versus “me too” thinking was applied to the site.

Unfortunately, i also have to say that i find our local council member not really brokering better interactions and design work.

WRT St Anthony’s redevelopment, another story complete. Do not confuse the two.

Wow. This is just a very poor result for the neighborhood. Highlands Square is going to have a big ol’ dirt lot for 4-5 years minimum? While the remaining part of the church slowly crumbles?

Again, wow – it’s just terrible. No amount of finger-pointing on either side will change the fact that West Highlands will suffer, and Tennyson St., Sunnyside, and other neighborhoods will benefit. This can be taught as a case study on the failure of mediation, collaboration, and zero-sum negative tactics. Really sad.

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